Watch Where You Set Your Virtual Foot – Advice on Dealing with Varying State Rules

Volume 37Number 5

By
Daniel J. Siegel

Daniel J. Siegel (dan@danieljsiegel.com), principal of the Law Offices of Daniel J. Siegel, LLC, is a litigator who is licensed to practice in Pennsylvania and New York. He is a frequent lecturer and author on legal technology, ethics and professional responsibility issues.

Having a virtual law office means a lawyer can practice from anywhere—and likewise that the lawyer can represent clients anywhere, right? Initially, it might seem so, at least to the uninformed. However, because every state has its own ethics rules, lawyers must comply with differing standards depending on where they are licensed. And when it comes to virtual law offices (VLOs), the fact is that while some states welcome them, other states limit their use.

For those considering opening a VLO, or already practicing in one, here is some guidance on dealing with the varying state rules so you can avoid drowning in ethical quicksand.

Differentiating Between MJP and Virtual PracticeTo begin, while there is no clear analogy to practicing in a VLO, the concept of multijurisdictional practice (MJP) provides a useful basis for comparison in terms of the ability to practice across states. The need for an MJP rule arose as technology and the changing nature of the practice created an increased need for lawyers to cross state borders temporarily to meet their clients’ needs. In response, the proposed Model Rule of Professional Conduct 5.5, “Unauthorized Practice of Law; Multijurisdictional Practice of Law.” As Comment 5 to the rule points out:

There are occasions in which a lawyer admitted to practice in another jurisdiction … may provide legal services on a temporary basis in this jurisdiction under circumstances that do not create an unreasonable risk to the interests of their clients, the public or the courts.

Most states have either adopted Rule 5.5 verbatim or in a form substantially similar to the model rule. But unlike the MJP concept—in which the focus is on a lawyer’s temporary physical presence in a state—a virtual law practice is, in essence, an online electronic office designed to eliminate, or at least reduce, the need to have a brick-and-mortar office in any location. In other words, the focus with VLOs is on the lawyer’s ability to practice without ever physically being present in a state.

Consequently, lawyers practicing with a VLO must address a number of unique issues to avoid setting “virtual” foot in any state in which they are not licensed to practice.

A Snapshot of Rules Can ConflictFrom an ethical perspective, a variety of issues have arisen that are unique to VLOs, and about which states have divergent rules—including these factors:

■ Whether the use of a VLO constitutes the unauthorized practice of law in jurisdictions other than those in which the members of the firm are licensed

■ How to prevent the lawyers in a VLO from engaging in the unauthorized practice of law

■ How to define and confirm in writing the attorney-client relationship

■ What additional safeguards should be employed to ensure the confidentiality of client information

To illustrate how the state rules can conflict, let’s use and as an example. It is not uncommon for lawyers to be licensed in both of these neighboring jurisdictions. However, the two states took different stances on VLOs in opinions that each issued last year.

The Pennsylvania Bar Association Committee on Legal Ethics and Professional Responsibility issued Formal Opinion 2010-200, “Ethical Obligations on Maintaining a Virtual Office for the Practice of Law in ,” which provides suggested guidelines for creating a VLO that complies with ’s Rules of Professional Conduct. Meanwhile, the New Jersey Advisory Committee on Professional Ethics and the Committee on Attorney Advertising issued a Joint Opinion concluding that “An attorney who has a bona fide office may also have a satellite office that is a ‘virtual office’” [emphasis in original]—but, simultaneously, not permitting attorneys to maintain only a virtual office. Thus, according to these committees’ opinions, New Jersey-licensed attorneys may have a virtual office only as an adjunct to a physical office, whereas has no requirement that lawyers maintain any physical office within the state.

The implications of this should be quite clear to lawyers: Resolving the issues relating to VLOs requires knowing the rules in each jurisdiction in which the lawyers in the VLO intend to practice. As the critical starting point, that means answering the following questions:

■ In what states are the lawyers in the VLO licensed to practice?

■ Will the VLO have a physical office in each state in which its lawyers are licensed?

■ If the VLO will not have a physical office in every state in which it is practicing, does each jurisdiction in which it will have only a VLO permit a firm to practice exclusively with a VLO?

■ Does the VLO’s website provide proper disclosures and disclaimers so that clients and potential clients understand where the firm practices and in what manner?

■ Does the firm comply with the rules of professional conduct for every jurisdiction in which any member of the firm is actively licensed?

■ When the rules of the jurisdictions where the firm practices differ, does the firm comply with the most restrictive or stringent of these standards?

■ When the rules of the jurisdictions in which the VLO operates conflict and are not reconcilable, has the firm taken reasonable steps to ensure that the manner in which it practices in each such state is consistent with the appropriate rules?

■ Does the firm decline to accept engagements from clients in any state in which the firm either is not licensed or in any state that prohibits attorneys from practicing in a VLO?

Some Guidelines for VLOsIt is beyond the scope of this article to address each of the questions involved in every state—so again, be sure to consult your jurisdiction’s rules for specific guidance. However, there are certain standards with which every VLO should strive to comply. A primary example is the ABA/LPM eLawyering Task Force’s “Suggested Minimum Requirements for Law Firms Delivering Legal Services Online,” which suggests the following requirements:

■ The VLO website must contain a secure client web space that is accessible only with a user name and secure password.

■ The VLO must have a system of conflict checking in place.

■ The VLO must not violate the rules governing the unauthorized practice of law and must serve only clients who are residents of the state(s) where the firm is authorized to practice, or clients who have a matter within the state(s) where the firm is authorized to practice.

■ The firm must have a procedure to verify that it is authorized to provide services to every client.

■ Attorneys must comply with any residency or bona fide office requirements and, when applicable, inform the public that [the firm] does not have a physical law office in a state or that the firm’s attorneys reside in a state other than the one in which they are offering services.

■ The website should include a disclaimer that clarifies any UPL limitations.

■ The website should clearly describe any limitations on its services, the requirements necessary to establish a lawyer-client relationship, and contain disclaimers addressing the creation of the lawyer-client relationship.

■ The website should clearly state that any legal information on it is not legal advice, and that a lawyer-client relationship must be established before legal services are provided.

■ Each client must accept and agree to a retainer/fee agreement—whether in writing or created in a variety of electronic formats—outlining the scope of legal services when becoming a client and that the acceptance of the agreement establishes the lawyer-client relationship.

■ No legal services will be provided until a lawyer-client relationship is established.

■ If applicable, the firm complies with any “client-identification” rules, even if the client is an “online” client.

■ The firm website must comply with all rules of professional responsibility that apply to marketing and/or advertising.

■ Payment of fees must comply with all rules governing attorney trust accounts, as well as any federal regulations, such as PCI compliance.

■ All data that is transferred online between the website and the firm must be encrypted.

■ Contracts with hosting providers should specify when the provider’s staff has access to client files and state that if the vendor’s staff is accessing client data for technical reasons, they are functioning as agents of the law firm as if they were the law firm’s internal staff.

■ There should be procedures to guarantee the security of client data, provide for redundant backups, and offer a procedure for exporting the data at the firm’s request.

■ The firm should consider obtaining certifications that confirm the security and the privacy policy of its websites.

For more on the task force and its suggested requirements, as well as additional information that’s available from the for Professional Responsibility, see the resources list in this issue.

There will always be ethical challenges inherent in operating a law practice, whether they relate to physical brick-and-mortar problems or the technology-centric issues that confront VLOs. But regardless of the type of practice, it is by paying careful attention to the applicable rules of professional conduct that lawyers can maintain best practices while ensuring that they address the needs and best interests of their clients.

■ Guidelines for the Use of Cloud Computing in Law Practice, January 15, 2011.

■ “eLawyering for Competitive Advantage: How to Earn Legal Fees While You Sleep,” by Richard Granat, 2008. This white paper focuses on enhancing productivity of solos and small law firms through the Internet and discusses marketing online legal services.

ABA Center for Professional Responsibility

The center, online at www.americanbar.org/groups/professional_responsibility.html, provides national leadership in developing and interpreting standards in legal and judicial ethics, professional regulation, professionalism and client protection. It also operates ETHICSearch, a free research service to help lawyers and other legal professionals find the right resources, including citations to relevant rules and ethics opinions, to understand and resolve ethics questions. In addition, the center provides online updates on the work of the ABA Commission on Ethics 20/20, which among other topics has included virtual law practice and cloud computing on its agenda.

A consortium of legal cloud computing vendors with the collective aim of helping shape both policies and standards relating to cloud computing at www.legalcloudcomputingassociation.org. (See EMERGING STANDARDS FOR CLOUD COMPUTING sidebar for more on this and the following group.)

International Legal Technology Organization

Focused on establishing best practices and standards for all aspects of law firms’ technology needs, including both cloud-based and on-premise infrastructure, at www.iltso.org.

Stephanie Kimbro’s blog, www.virtuallawpractice.org, keeps readers up-to-date on the topics covered in her Virtual Law Practice book. The site includes the free ebook Serving the DIY Client: Guide to Unbundling for the Private Practitioner, a general introduction to unbundling with checklists showing how to add this form of legal service delivery to a virtual law office and deliver it using document assembly and automation technology.